Canadian housing starts, building permits show strength

By Andrea Hopkins
TORONTO, Dec 8 (Reuters) - Canadian housing starts rose
unexpectedly in November and building permits surged in October,
fueling Canada's prolonged housing boom even as the nation's
weak economy contributed to underlying softness in some regions,
reports showed on Tuesday.
Groundbreaking on new homes jumped to 211,916 units last
month from a downwardly revised 197,712 units in October,
bucking expectations for a softening to 197,300 starts, a report
from the Canadian Mortgage and Housing Corp showed.
The continued strength in homebuilding was concentrated in
condo building and in two regions - Ontario and the Prairies -
and left economists wondering at a patchy housing boom that was
not expected to last as long as it has.
"The strength in Canadian housing construction this year has
been somewhat of a mystery," Derek Holt, vice president of
Scotiabank Economics, said in a note to clients.
The Bank of Canada has cut rates twice this year to help
bolster the economy against slumping oil prices.
Robert Kavcic, senior economist at BMO Capital Markets,
noted a surge in starts in the energy heartland of the Prairie
provinces - Alberta, Saskatchewan and Manitoba - which has been
hard-hit by the long slump in oil prices.
"Regionally, the Prairies were curiously strong in November,
led by a hefty gain in Alberta," he said in a research note.
Canada's housing market has been growing since 2009, despite
a tepid economy. While analysts have long warned the market is
at risk of a correction and some have predicted a crash, most
believe a soft landing will happen eventually.
The Bank of Canada has kept official interest rates at
historic lows for years in a bid to stimulate the economy,
leaving federal government policymakers mulling tighter mortgage
lending regulations to deal with the housing boom.
"Canadian homebuilding activity remains robust, and
accelerating momentum through the latter stages of 2015 will
likely catch the eye of policymakers currently stewing over the
strength in real estate. Like the resale market though, the real
strength is concentrated in a few local areas," Kavcic noted.
A separate report from Statistics Canada showed the value of
Canadian building permits surged by a higher-than-expected 9.1
percent in October from September, the first increase in three
months. Analysts surveyed by Reuters had expected an increase of
3.2 percent.
Construction intentions for multi-family dwellings and
institutional buildings in Alberta led the gain as contractors
sought permits before new building code regulations came into
force.